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“Toyota Strengthens Supervision of Troubled Daihatsu Small Car Division Amid Scandal”

Daihatsu Motor of Japan announced on Monday its intention to revamp its reporting procedures concerning development and certification, aligning them more closely with its parent company, Toyota Motor (7203.T). This strategic shift comes amidst efforts to address a safety test certification scandal that has marred the compact car manufacturer’s reputation. The decision follows the recent appointment of a new president from Toyota to lead Daihatsu, tasked with the formidable challenge of revitalizing the small-car division and steering it towards sustainable growth.

While Daihatsu will continue to undertake actual vehicle development under Toyota’s commission, the company has repositioned itself as a “mobility company centered on mini vehicles.” As part of its structural adjustments, Daihatsu has opted to dissolve the Emerging-market Compact Car Company (ECC), previously serving as an intermediary between Toyota and Daihatsu. The realignment will see Daihatsu transferring its reporting line for development and certification to another Toyota segment specialized in compact cars. These adjustments will be executed in accordance with model changeover schedules.

Masahiro Inoue, President of Daihatsu, emphasized Toyota’s increased involvement in resource management and optimization pertaining to Daihatsu’s business and product planning. Inoue expressed Daihatsu’s ambition to pioneer the introduction of battery-powered “kei cars,” which are characterized by their compact size and lower power compared to conventional vehicles, although no specific timeline was provided.

Toyota experienced a significant decline in domestic sales in February, partly attributed to production halts at Daihatsu, a manufacturer of some Toyota-branded vehicles, and the negative impact stemming from safety certification discrepancies within its subsidiary. Additionally, Toyota has grappled with governance issues within affiliated companies such as truck maker Hino Motors (7205.T) and Toyota Industries (6201.T). The confluence of scandals prompted Toyota Chairman Akio Toyoda to issue a rare public apology in January.

In terms of volume, Daihatsu accounted for 4% of Toyota’s total group sales in the first two months of the year, a decrease from 7% recorded in the entirety of 2023. Notably, Daihatsu President Inoue previously served as Toyota’s CEO for the Latin America and Caribbean region before assuming his current role on March 1.

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